LabCorp 2013 Annual Report Download - page 18

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LABORATORY CORPORATION OF AMERICA
Management’s Discussion and Analysis
of Financial Condition and Results of Operations (in millions)
Credit Ratings
The Company’s debt ratings of Baa2 from Moody’s and BBB+ from Standard & Poor’s contribute to its ability to access capital markets.
Contractual Cash Obligations
Payments Due by Period
2015- 2017- 2019 and
Total 2014 2016 2018 thereafter
Operating lease obligations $ 373.4 $ 132.3 $ 139.9 $ 60.2 $ 41.0
Contingent future licensing payments(a) 15.6 3.0 5.7 5.0 1.9
Minimum royalty payments 6.0 1.2 1.9 1.9 1.0
Zero-coupon subordinated notes(b) 110.8 110.8 – – –
Scheduled interest payments on Senior Notes 630.5 103.7 188.3 148.0 190.5
Long-term debt, other than revolving credit facility 2,904.3 2.4 579.9 905.0 1,417.0
Total contractual cash obligations(c)(d) $ 4,040.6 $ 353.4 $ 915.7 $ 1,120.1 $ 1,651.4
(a) Contingent future licensing payments will be made if certain events take place, such as the launch of a specific test, the transfer of certain technology, and when specified revenue milestones are met.
(b) As announced by the Company on January 2, 2014, holders of the zero-coupon subordinated notes may choose to convert their notes during the first quarter of 2014 subject to terms as defined in the note agreement. See “Note 11 to Consolidated Financial Statements”
and “Credit Ratings” above for further information regarding the Company’s zero-coupon subordinated notes.
(c) The table does not include obligations under the Company’s pension and postretirement benefit plans, which are included in “Note 16 to Consolidated Financial Statements.” Benefits under the Company’s postretirement medical plan are made when claims are submit-
ted for payment, the timing of which is not practicable to estimate.
(d) The table does not include the Company’s reserves for unrecognized tax benefits. The Company had a $34.9 and $46.2 reserve for unrecognized tax benefits, including interest and penalties, at December 31, 2013 and 2012, respectively, which is included in “Note 13 to
Consolidated Financial Statements.” Substantially all of these tax reserves are classified in other long-term liabilities in the Company’s Consolidated Balance Sheets at December 31, 2013 and 2012.
Off-Balance Sheet Arrangements
The Company does not have transactions or relationships with
“special purpose” entities, and the Company does not have any
off balance sheet financing other than normal operating leases.
Other Commercial Commitments
As of December 31, 2013, the Company provided letters of credit
aggregating approximately $42.5, primarily in connection with
certain insurance programs. Letters of credit provided by the
Company are secured by the Company’s Revolving Credit Facility
and are renewed annually, around mid-year.
On October 14, 2011, the Company issued notice to a
noncontrolling interest holder in its Other segment of its intent to
purchase the holder’s partnership units in accordance with the
terms of the joint venture’s partnership agreement. On November 28,
2011, this purchase was completed for a total purchase price of
CN$151.7 as outlined in the partnership agreement (CN$147.8 plus
certain adjustments relating to cash distribution hold backs made
to finance recent business acquisitions and capital expenditures).
The purchase of these additional partnership units brings the
Company’s percentage interest owned to 98.2%.